131 Me. 469 | Me. | 1933
This is a real action heard by the court with right of exceptions reserved, and is before us on an exception to a ruling of the presiding Justice ordering a judgment for the plaintiff. On the pleadings the sole issue is one of title to real estate as between the plaintiff and the defendant.
The facts are agreed upon. Orlando W. Brown on June 8, 1927, conveyed the real estate in question by warranty deed to the American Specialty Manufacturing Co. Through inadvertence this deed was not recorded but the corporation until it was adjudicated a bankrupt in February 1931 occupied the property and remained in possession of it. In its bankruptcy schedule the com
Disregarding the devolution of this title, we shall treat the question as if it were one of priority between the holder of an unrecorded deed and the trustee in bankruptcy of the grantor. The same principles applicable to the decision of such issue govern the rights of the parties to this action.
R. S. 1930, Chap. 87, Sec. 14, provided in part as follows: “No conveyance of an estate in fee simple, fee tail, or for life, or lease for more than two years or for an indefinite term is effectual against any person except the grantor, his heirs and devisees, and persons having actual notice thereof unless the deed or lease is acknowledged and recorded in the registry of deeds within the county where the land lies.” . . .
In view of this provision the bankrupt, even assuming that he could have conveyed a title to a bona fide purchaser, could himself have maintained no claim to this real estate. A creditor, however, complying with the requirements of R. S., Chap. 95, Sec. 63, and attaching the real estate without notice of the rights of the holder of the unrecorded deed would have priority over such holder. Stanley v. Perley, 5 Me., 369; Roberts v. Bourne, 23 Me., 165; Veazie v. Parker, 23 Me., 170; Parker v. Prescott, 87 Me., 444, 32 A., 1001. The question is whether the trustee of the bankrupt stands in any better position than the bankrupt himself, and has rights similar to those of a bona fide purchaser or of an attaching creditor.
Under the provisions of the Bankruptcy Act prior to 1910 the trustee took only such rights as the bankrupt had, and in a suit
The defendant contends, however, that since the amendment to the Bankruptcy Act adopted June 25, 1910, Chap. 412, Sec. 8, 36 Stat., 840, U. S. C. A. 11, Sec. 75, the trustee in bankruptcy is in the position of an attaching creditor, and has a lien on the property superior to that of the holder of an unrecorded deed. The provisions of this amendment in so far as they relate to this question read as follows: “Such trustee, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings thereon; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied.”
If the property in question is subject to claims or liens valid against creditors, it is not to be regarded as property “in the custody” or “coming into the custody” of the bankruptcy court as contemplated by the provisions of this section, so that the trustee would have a lien thereon. As before the passage of the amendment the trustee takes the bankrupt’s title subject to equities good as against general creditors. Such is the trend of decisions construing this statute.
In Clark v. Snelling, 205 Fed., 240 (C. C. A., First Cir.), a bankrupt held real estate under a parol agreement to transfer it to his mother who had been in possession of it for many years and had made improvements on it. In spite of the fact that the bankrupt could have given a valid title to a bona fide purchaser, the Court held that the trustee in bankruptcy took the bankrupt’s title subject to the mother’s equitable right to compel a conveyance. The Court said, page 244, with particular reference to the amendment of 1910: “We agree with the learned District Judge in finding nothing in the Bankruptcy Act, as it stands at present, which must
The decision in this case has been followed in a very recent case in the same circuit. Vincent v. Tafeen, 40 F. (2d), 823. Here a creditor with an equitable lien on property of the bankrupt took possession of the same before the bankruptcy. The trustee claimed that under the provisions of the amendment of 1910 he was in the position of an attaching creditor with a right superior to that of the equitable lienor. The Court found, however, that this was not property “in the custody” or “coming into the custody of the bankruptcy court,” and that accordingly the trustee was not in the position of a creditor holding a lien on it.
In the case of In re Perelstine, 19 F. (2d), 408, it is held that the right of a vendor to rescind a sale for fraud by the vendee is good against the trustee in bankruptcy of the vendee.
In Sapero v. Neiswender, 23 F. (2d), 403 (C. C. A., Fourth Cir.), a bankrupt prior to his bankruptcy had assigned notes secured by a mortgage of real estate to the petitioner as part payment of a debt. The notes were endorsed and delivered but the bankrupt failed to assign the mortgage. Under the statutes of Maryland the title to the notes was presumed to be in the person holding the record title of the mortgage. The Court ruled that, as there was nothing in the Maryland statutes which made the unrecorded assignment void as to creditors, the bankrupt held the mortgage deed and the legal title conveyed therein as trustee for the petitioner, and the trustee in bankruptcy held it subject to the same equity. The Court regarded this as property not in the custody of the bankruptcy court and accordingly as to it the trustee was vested only with the rights of a judgment creditor holding an execution duly returned unsatisfied.
See to the same effect as the above Robertson v. Scholtzhauer, 243 Fed., 324, In re Gamble, 14 F. (2d), 847.
The main purpose of the amendment of 1910 was to change the rule declared in York v. Cassell, supra, under which the trustee in
In the cases cited by counsel for the defendant the unrecorded conveyances referred to were void under the various state statutes as to creditors, and under the provisions of the Bankruptcy Act as amended the trustee was given a lien on such property for the benefit of creditors. Davis v. Harlow, 130 Md., 165, 100 A., 102; Cooper Grocery Co. v. Park, 218 Fed., 42 (C. C. A., Fifth Cir.); Fairbanks Steam Shovel Co. v. Wills, 240 U. S., 641, 60 L. Ed., 841; Potter Manufacturing Co. v. Arthur, supra; Townsend v. Ashepoo Fertilizer Co., 212 Fed., 97.
The aim of the Bankruptcy Act is to marshall the property of an insolvent debtor and to apply it in accordance with well recognized equitable principles for the benefit of his creditors. It is not its intent to seize upon property in his hands which is subject to equities in favor of third persons. The principle asserted by Chief Justice Peters in an analogous situation applies here. “Equity disdains to take the property of one man to pay another’s debt.” Houghton v. Davenport, 74 Me., 590, 594.
The fallacy of the defendant’s contention here is in assuming that, because the Bankruptcy Act as amended places the trustee in the position of a lien creditor as to certain property, it did so with respect to all property which the bankrupt might by any means have transferred. As is pointed out in the very able opinion in Clark v. Snelling, supra, page 243, “There is difficulty in saying that by provisions giving trustees certain rights, remedies, and powers all further rights are also given which might, in any event have been obtained by exercising the rights, remedies, and powers described as given.”
The real estate here in question had been in the open possession of the plaintiff’s predecessor in title for several years. The bank
Exception overruled.